China’s Stimulus: Fast & Furious
China’s stock market has roared back to life, turbocharged by an aggressive economic stimulus package — the “bazooka” that many had been waiting for. The scope and timing of this package caught many investors off guard. The CSI 300 index has soared by more than 20% in the past few trading days, marking its best weekly performance since 2008.
This round of stimulus is far bolder than the smaller measures we saw earlier this year. Beijing is pulling out all the stops with significant liquidity injections, cuts to reserve ratios for banks, as well as interest rate cuts. The government is also doubling down on rescuing the ailing property market by easing mortgage terms and lowering down payment requirements for second homes. It’s a more aggressive move compared to the piecemeal steps taken earlier this year, which struggled to bring about a real recovery.
So far, this round of stimulus has sparked a strong market rebound. The sheer scope of the measures has provided a surge of confidence in the markets, and many investors — who had been waiting for a reason to jump back in — have seized the opportunity, driven by fear of missing out and the fact that valuations were very cheap. However, I believe it will take time for these measures to fully filter down to the real economy, especially to domestic investors, who are the true drivers of the Chinese stock market.
Despite the stimulus and the stock market optimism, the deeper structural challenges in China remain. Weak consumer confidence, high youth unemployment and lingering issues in the property market continue to cast a shadow over long-term growth.
That said, in the near term, I expect the rally to provide opportunities in sectors like tech and consumer goods. But let’s be realistic — this looks more like a short-term rebound for now. Domestic demand and credit growth remain sluggish, and consumer confidence is still fragile. It will take time for these stimulus measures to penetrate the broader economy and generate the kind of long-term bull market we all hope to see.
One of the key risks continues to be policy uncertainty. To ensure sustained growth, the Chinese government must encourage private sector growth and innovation, particularly among larger entrepreneurs. If policies continue to stifle this, the rally could lose momentum once the stimulus euphoria wears off.
So, while this stimulus has undoubtedly given the market a fast and furious jolt, turning this into a sustained bull market will take time — and surely, more reform. I’m cautiously optimistic. There’s no doubt that this is a step in the right direction, but broader, deeper economic changes will be needed to keep the momentum going. For now, it’s a promising development.
As long-term investors, we should focus on companies with strong fundamentals and keep a close eye on longer-term reforms. This rally has a lot of potential, but the real test will be whether it can sustain itself in the months to come.